In the news, Republicans and Democrats are furious that AIG is paying $165 million in retention bonuses. On Fox News, “AIG to Hand Out Another $165M in Bonuses,” there is a through story that explains a lot of this issue.
It is time to make some readers angry. AIG must pay these bonuses. Why? If you read the letter from AIG chairman and CEO Edward Liddy to Treasury Secretary Timothy Geithner you will understand what these bonuses where for and why they were offered. The main quote from the letter is:
Without these bonuses, “We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses which are now being operated on behalf of the American taxpayers.”
These were CONTRACTS that were offered to employees of AIG were to meet certain fulfillments of these contracts. The employees met the requirement and earned their money. According to the most basic contract law, AIG must pay these merit bonuses.
Add this caveat to this issue. What happens to AIG, if they do not pay these bonuses? What will these employees do? What would you do? First, they will sue in court for AIG to enforce these contracts. They should win and probably will. Second, they will quit.
Now, who owns 80% of AIG? You do. Yes, the United States taxpayer own 80% of AIG. How will AIG operate without their best talent? They won’t. Their performance will plummet and they will not be able to pay back the loans they took from us. Bites doesn’t it? You bet it does.
To make matters worse, yes, it gets worse. Now, let’s look back to TARP. If you read it, you probably didn’t, don’t worry Congress didn’t either. There is nothing in the legislation that tells AIG or the government how uses this money. When the government gave AIG the money, there were NOT any strings attached. AIG could do what it wanted with the money to stay afloat.
Therefore, it is not AIG’s fault; it is Congress’s for not putting strings on the money. It is the fault of the government, not AIG. But, this is what government does. They mess up and then blame everyone else but the actual cause, themselves.
Also, AIG and banks are sending money overseas to foreign investments and banks. Guess what? We cannot do anything about that either, because there weren’t string attached.
So, as Obama, Geithner, and Barney Frank act like “indian givers” and try to tell AIG how to spend the money, AIG is going to pay the bonuses, because they have to according to the contacts. This should be a lesson to companies taking money from the government, and for the government lending money to companies. As we know, they won’t learn and this is only the beginning.